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LFL growth with margin resilience

In Q3, Jubilant Foodworks’ (JUBI IN) revenue grew in line, while margin was ahead of estimates. Key highlights were: a) LFL growth of 5.0% on a high base, b) margin expansion led by operating leverage, c) premium product launches and d) double-digit growth at Popeyes. JUBI aims for c5% LFL growth in the near term with expansion spree continuing. Parallelly, margins are well supported, driven by multi-lever interventions across cost line items, a rarity in the current QSR operating environment. With in-line Q3, we retain our revenue and EBITDA estimates. Thus, we maintain BUY with TP at INR 780.

Robust LFL growth on a high base: JUBI’s standalone revenue surged c12.0% YoY, driven by a) sustained LFL performance (5% in Q3) despite a higher base (noteworthy given the strain in overall QSR) and b) healthy store growth of 12.0% YoY (+75 to 2,396) – JUBI has gained market share. Mix-wise, sales from the delivery channel grew 17.1% YoY, with share at 75% in overall mix, while the dine-in sales pared c2.0%. JUBI is keen to lift its dine-in channel to boost growth. Ramp up in the pace of menu innovation was seen in launches: a) Cheese Lava Pull Apart Pizza (INR 399), b) Sourdough Pizza (INR 369), which sits in the premium tier of the menu, with further launches expected from the product pipeline. JUBI aims for a network of 5,000 stores, primarily led by Domino’s India, significantly in tier II and III markets. We see JUBI’s store network at ~2,870 (CAGR: ~10% in FY25-28E), given the headroom to expand.

Good show on margins: EBITDA margin (Post IND-AS) rose 109bps YoY, propped across line items, primarily led by lower employee cost (80bps), and lower other expense (50bps), though gross margin pared 20bps YoY to 74.9%. Gross margin grew 50bps QoQ, led by calibrated price hike in menu pockets and gins in premium sales mix. JUBI has ample margin levers, led by: a) price action, b) premium product mix, c) paring losses at Popeyes, and d) cost control across items. So, EBITDA margin is on track to hit 21.3% by FY28E, rising 80bps from Q3 levels.

Maintain BUY with TP at INR 780: JUBI posted in-line growth and beat on margin. It reiterated FY27 sales growth guidance of ~15%, supported by planned expansion to 700+ cities in the medium term. Per our channel check, ~70% of delivery revenue is from own app. JUBI exhibits multi-margin levers, including pruning losses at Popeyes and in-app ad monetization. JUBI aims to derive ~1% of delivery sales (INR 0.40-0.60bn) through ad revenue (implying ~50bps margin accretion), with further upside risks (if ads are integrated into the pre-order journey).

With e-commerce peers sharing 3-6% of GOV from ads, JUBI may scale up ad revenue to ~2% of sales. Popeyes continues to scale well, with third quarter of double-digit LFL and plans to add ~300 stores, near term. With in-line Q3, we retain revenue/ EBITDA estimates. The standalone business trades at 25x FY28E EV/EBITDA (pre IndAS). JUBI is our top pick in QSR space, led by scalable growth, delivery-led LFL, potential incorporation of Popeyes valuation, and improving margin. This aligns with our view that QSR will be a key beneficiaries post-GST 2.0.We reiterate BUY with a TP of INR 780, valuing standalone at 36x EV/EBITDA (Pre-IND as) and DPEU at 40x P/E (Dec ’27E). Key risks are sharper drop in dine-in, and lag in margin improvement.

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